Tell everyone you know who might possibly be able to, to ask to telecommute

You can't just fight alligators, though, you have to start draining the swamp. The Hirsch report says at least 10 years is required for even an "Apollo Mission" level of effort by government, industry, and citizens. Hence, the beginning of a dramatic push to restructure our transportation system cannot be put off.

Thanks for the story. The irony is that my local paper, The Dallas Morning News, is (mostly) still pretending that the net export decline is not newsworthy.

Wow! Thanks for this piece of news, Olle! Can you translate key parts of the article (I don't get the paper version of DI)?

This may be small thing for others and may be easily lost in this summer season news, but I think it is big for us Swedes and Finns. DI is followed closely by business people here in Finland as well, so some of the more hard-headed bozos who's heads I've been trying to turn will now start to make a bit more notice.

It really is quite funny, if it weren't so sad at the same time.

We can have the exact same data and often more thorough analysis, but they don't believe us. But once it's in DI/KL/WSJ/FT/name-your-paper-here, it becomes the truth - regardless of the solidity of the data or reasoning.

But I'm glad it's happening. This will really help in trying to tell the companies what they can do. Ignoring the fundamentals is not a wise choice for many a business.

In fact, I just came from a meeting with a very sharp and open-minded CEO, to whom I gave the overall PO pitch a year ago. This year, after rising transportation costs, spiraling oil price and combined crunch in financial and agri-comms sectors, he's ready to act. Unfortunately he's clearly in the heatseeker category. The rest will follow with a 2-5 year lag based on my previous experience with such trends. They are totally in a reactive and temporal damage control mode. They think this is a passing trend. By the time they may have changed their mind, it may well be way too late for many of them.

So if you're investing in companies, start making note which of them are peak oil aware and actually acting on it.

Hi Occitan,
Just think a minute, in 1908 what was the per capita electricity production capacity in US?, I would guess only a fraction of the 11,000 kwh today. Now that allows a lot of todays electricity to be diverted for trams, electric cars etc. Most developed countries do quiet well with annual 4,000 to 8,000 kwh/ per capita.
In the US 15 million new vehicles are sold per year and 50% of VMT is done by vehicles aged 6 years or less. By 2010 there may be less than 1million hybrids sold in US, but many other vehicles having much higher fuel economy than existing new cars(25-27mpg) could be sold, and if gasoline stays above $4 a gallon will be sold. SO in 6 years we could have 50% of VMT by vehicles perhaps having 50% or possibly having 100% better fuel economy than todays new vehicles. your assumption that it would take 100 years to replace entire vehicle fleet with hybrids is assuming that the maximum production of hybrids will never exceed 7% of market. If think even GM completely changes it's production in less than 20years( look at how quickly SUVs and light trucks went from 10% of fleet to >50%). At the rate of new SUVs sales could see SUV and light trucks back to 10% of new fleet in a few years. Since this segment has 22mpg average fuel use, if these were replaced by 44 mpg vehicles, very substantial reductions in gasoline use would be possible.

If you look at traffic on weekends, its obvious that a lot of VMT are not essential for work or for the productive part of the economy, but are for shopping, entertainment,recreation. If prices continue to rise to say $8 a gallon( European prices) or even higher, 2 car families will use the more fuel efficient vehicle more often, a even cut back on some driving.We will probably see an increase in mass-transit use.

I like the idea of mass-transit but its just not going to happen very quickly because of the very high capital costs, the way cities have been built since 1945 and great increases in taxes needed. Much easier to convince US (and Australian) public to buy new plug-in hybrids and hybrids and save a bundle on gasoline, keep the suburbia dream, add a little insulation to homes, replace incandescent bulbs with more efficient lights and a few other token conservation measures .

Another startling figure is the US consumption of gasoline at 388.6 million gallons/day. That's 141.839 billion gallons/year. Now ask if 1/4 of our corn crop is worth converting into 6.5 billion gallons of ethanol.

But when oil starts getting short in supply, food is also going to get short in supply. Oil at that point will not be priced and paid for in currency but in food.
The USA is one of the biggest food exporters so I am guessing that the Middle East countries that are very dependant on food imports are going to be very happy to send oil to the USA for food.
Countries like China and India are big importers of both oil and food so they may have a difficult time coming up with food to trade for oil.
Countries like Brazil that have food for export are also going to be oil exporters so they will not be in a good position to trade food for oil with the Middle East, but will be supplying what exports they have for commodities like raw industrial materials.
The straight global currency trading system that currently exists is going to see some major changes post peak oil.
When people think post peak oil they are going to have to "think outside the box" about a whole lot more things than is currently being done.

My figures check out. How do you figure, and it is not clear who you mean by we.

Nope.

Rationing is providing preferential access to available oil imports. So if 10Mbpd is the available import level, 5Mbpd (say) are allocated for police, farming, ambulance, politicians, key workers etc.

5 years later when imports are only 7mbpd still 5mbpd are allocated for those uses - resulting in only 2mbpd for everyone else. 30% reduction in imports results in 60% reduction in available fuel for the man in the street. The average annual decline rate of 6% becomes 12% - eg its an additional multiplier for this group.

And how can people move if they can't sell their house? Have you looked at the housing market stats lately, and it will get worse in the Peak Oil crisis, the values of homes will drop tremendously.

A lot of investment will indeed take place at different levels of price.
However, to take a different example, the hunt for oil reserves in the North sea will doubtless be pursued rather vigorously if oil is at $200/barrel.
If the world economy falls off the cliff so it is only going to get $80, how hard are companies going to look for this expensive oil?
Even if the oil price later recovers, knowing that it could fall again as the world economy can't sustain very high prices would mean that investment in the ultra-high cost reserves would be too risky.
EDIT:
The thought I am trying to get across is that if the world economy can't take ever higher oil prices, then the very expensive stuff gets stranded and is never produced.
For the oil exporters their revenues are also reduced compared to what they would have been if the oil price just went up and up, so we are in a situation of demand destruction pure and simple.

The EROI is important, but if the economy is able to weather very high oil prices and both the economy and the price remain stable, or in the case of the oil price not to drop, then it is possible to sustain investment at relatively low EROI.
If the economy is in tatters, then you need a higher EROI to justify the investment, especially if the price swings, as the economy is permanently teetering on the brink of collapse which would knock oil prices lower, making your investment uneconomic.
It is a result of the instabilities expected at peak, which several people have commented on.

The oil sands are something of a special case, as they have massive reserves and we know exactly where they are, so any progress in increasing EROI is absolute and can be expected to generate money for many years.
The EROI for this source seems likely to be pushed up to very reasonable levels, in my view.
It is the flow rate which means that it will not support oil use on anything like present levels.

"Of course the key factor is price"

I must quibble a little with this.
The key factor is PROFIT.
Both in dollar terms and in energy terms.

If price drops but costs drop correspondingly (or quicker) then profit stays static or actually increases.

Costs can drop by increasing efficiency.

So my argument is that oil production will NOT be curtailed by a price drop unless costs cannot be controlled or reduced.

I'm talking about major exporters whose economies are dominated by oil export revenue. If they lose that source of revenue their economies shrink, they can't import so many BMWs. This is not the case with UK, Indonesia, Mexico... but is the case the countries I listed above, where oil export revenue is significantly larger than GDP growth.

...subscribing to the fallacy that since oil is a 'smaller' percentage of GDP it is somehow less necessary.

I'm not talking about using the oil to generate GDP, but the value of the exported oil. What happens now that they aren't exporting is anyone's guess but not not very important to this discussion.

WESTEXAS, DANBROWNE, RESEARCH24, TENTHOUSANDMILEMARGIN, AND KARLOF1,

That was yesterday, today is a different day. Yesterday we had easy coal, oil and natural gas. Not anymore. And now the scale needed to transform transportation is immense.

There will be plenty of cheap labor available soon enough. But the capital costs of electrifying the transportation system at $1,000 and $5,000 per barrel are high. The capital costs are the oil, natrural gas, and coal used in mining, manufacturing, and transporting the equipment for a whole new economy. That oil will soon be needed to just keep things going -- maintaining the interstate highways, semis moving food, snow plowing, tractors, combines, home and institutional heating, basic government services (local/state/federal), hospitals, school bus transport, schools etc. The dollar and U.S. monetary system are collapsing today. We won't be able to buy the oil to make all of the electric trains and light rail and infrastructure of hundreds of thousands of miles of power lines, stations, rails, electric power generating stations that are necessary to have an electric transportation system. Get your calculators out and begin to calculate the magnitude of infrastructure you are talking about in a nation of 300 million people who are dispersed all over the country, not just in cities. Take a look at the vast coverage of the highways we have all over this nation.

Many people on this site are great at calculating oil depletion rates and land export models. Use those skills to look at the economics of doing this from the standpoint of how much will oil cost and what will we be able to buy and what will it be used for. The trade offs will soon be: do we heat people's homes or invest in light rail? You can see what will win out. This is real now. Many people cannot afford heating bills this winter and state governments will have to pull money from other areas, such as highway maintenance, then the decisions get into emergency choices. The investments needed for a transformation to an electric economy will lose out over keeping people alive.

Cheers,

Cliff Wirth

I agree with Dan, We tend to underestimate what people can do without oil power. People marvel at how the Egyptians could build the pyramids. They forget about cranes, the multiplication of power by mechanics.

Its also interesting how modern historians seem completely unable to imagine what life was like pre internal combustion engine.

The trains, engines, cars, rails etc. were not made by hand. Lot at the infrastructure I discussed about, almost none of it can be made by hand.

During the Great Depression, the U.S. had a great abundance of cheap Texas oil to leverage industry, which pulled us out of the depression with the public works and mainly the industrial build up for WWII. The population of the U.S. in 1930 was 123 million, mostly small town and rural/agricultural, and the nation was consuming 2 million barrels of oil per day. The population is now 300 million, mostly industrial, with a vast oil consuming highway system, consuming 21 million barrels of oil a day. This is not the 1930s and we don't have lots of oil, and now we have a big need for it, just to survive. This is called Peak Oil, declining production of energy that is vital to the economy. As I said before, that was yesterday, today is another day. Comparing today to the 1930s makes no sense. The idea of public works was to build up industry and thus consume more oil. Public works is the worst direction we can go in, as it will use up oil that we need to survive.

You have no idea of what the political future brings, it is speculation from someone who has little experience in this areas.

Nice pics! Like I said the other day, we will toss-off the mechanized rail-layers and go back to using man power because of the many men that will need something to do besides revolt, which is why the CCC was started by FDR--to forestall revolt by the massive numbers of unemployed young men.

I don't see any steam driven equipment around, do you? So we would have to manufacture it with oil, natural gas, and coal, as well as all of the other stuff for the electric transportation transformation that I discussed above. Coal will be mighty expensive to mine and transport with oil at $1,000 a barrel. And when people are freezing to death in their homes from a lack of oil, I don't think you transport make over will get the oil that is needed to keep them alive. In a democracy, the squeaky wheel gets the grease. The people who are dying of cold will squeak louder than your electric stuff.

£

BP Statistical Review lists the production numbers for Algeria, Angola, Iraq, Libya and Nigeria, but not their consumption numbers. This suggests as the consumption numbers are lumped together (in others) that these numbers must be estimates, thus the lumped figures on net exports (for the mentioned countries) becomes estimates.

In other words there are sources for unceartinties in the numbers, but quantifying these will as of now be pure guesswork.

£
Explain how North Sea production affected demand/consumption within OECD in the early 80’s and made consumption dive sharply?

North Sea production would (if OECD was viewed as a closed system) reduce the need for imports from non-OECD. Increased North Sea production (and still viewing OECD as a closed system) should under equal circumstances encourage more consumption as this would be an exchange of money between sectors within the closed system.

If not technically correct there are now several big economies that are in recession, and inflation is growing which suggests that the central banks will raise interest rates, if they will reach the same levels as in early 80’s remain to be seen.
I will agree that this time it will be different than in the 80’s.
It will be worse due to the imploding housing bubble and the global credit contraction (due to virtual money) and I believe we are just in the feeble opening of a full blown recession and I note that several profiled economists draws parallels to the 30’s and worse.

FSU had a high in oil production of 12,7 Mb/d in 1987 according to BP Statistical Review 2008.

Hello Dave,

The World will not be able to sustain the high prices of energy required to continue growth in energy supplies to fuel continued economical growth.

I also think that a price decline in oil (and other energy) will put a freeze on alternatives with low EROEI. A lower oil price will also see to it that development of fields that is now marginally economical due to the high oil price will be postponed…. perhaps indefinitely.

Fields that now is economical at today’s oil price will be momentarily shut down at lower oil prices as/if these becomes non profitable, thus accelerating the decline in production or supplies.

Capital for investments is an important element in developing fresh energy supplies, and as the global liquidity contraction continues to play out and if oil prices start to decline I think the picture very fast could become very bleak to bring in new supplies.

We are here entering a discusion of cause and effects that probably will play out in several stages.

The recent run up in oil prices I would tend to believe is very much caused by a decline in world net oil exports and/or even production/extraction.

Have we yet seen all the effects from this run up in oil prices?

If world demand/consumption dropped by say 8 Mb/d during 2-3 years (which is likely if the past gives any guidance) could we then unambiguously conclude that this reduction in consumption was solely to blame on a decline of net oil exports?

That is what I believe.

After some time (could be anything from 2 to 5 years) demand would start to regrow and at some time hit the supply on its way south causing new price hikes.

Thanks Pitt, This is helpful, but still others are forecasting much steeper declines: Energy Watch Group, Robelius, Rembrandt, and Ace whose decline is one of the slightest at 3%. Thus, my guess is that if Luis de Sousa used some other modeling methods, he would come up with higher percentages. I'm not suggesting that he go look for what will give him the fastest depletion, but he should account for the differences, and in doing so maybe he would give us some more to go on.

zceb90, I agree. We are now on the barren side of the Peak Oil curve.

1. the oil we will get is of lower quality, requires more refining, and contains less useful energy, gasoline, diesel.

2. As oil depletion progresses, more and more oil is used to produce oil. When the amount of oil used to produce a barrel of oil equals the amount of oil produced, it is pointless to continue oil production. In addition to the oil used on site to produce and refine oil, energy is used in all of the processes for the machinery, equipment, and personnel used in the extraction, transport, and refining processes. For deepwater oil production, this would include all of the ships, platforms, steel piping (many kilometers of pipes on-site and to onshore locations), and their employees, including the energy used in making the hundreds of thousands of parts, the energy used in the factories that make the parts, the energy used in transportation of all of the parts and employees, as well as the energy that is consumed when employees and stockholders spend their salaries or dividends on goods and services (food, automobiles, yachts, airplanes, recreation vehicles, vacations, consumer purchases, etc.). Because there are a number of confounded energy input variables, it is difficult to measure all of this consumption of energy, but it is an economic reality that is shown in corporate decisions about the profitability of deepwater oil projects. For deepwater, heavy oil, tar sands, and extraction where special techniques are used, the point at which energy consumed equals the energy produced will be reached rapidly. For this reason, some oil that is classified as recoverable (for example deepwater oil, heavy oil, and the Bakken formation) may never be recovered.

3. All of the recoverable oil may not be recovered, becasue the society/civilization/corporate structure that extracts oil will collapse long before we are able to extract all recoverable oil. Oil shortages and natural gas shortages will generate multiple crises for the nation: (1) Shortages in gasoline, diesel, and jet fuel will limit travel to work for oil rig/platform workers and technicians, coal miners, highway maintenance personnel, and maintenance workers for electric power generation stations and power lines. (2) Without truck and air transport, spare parts for virtually everything in the economy won’t be delivered, including parts needed for highway maintenance and energy production equipment. Simmons notes that 50,000 unique parts are necessary to create a working oil field. Many more parts are necessary for ultra deep water drilling operations, including a variety of high tech ships, remotely operated underwater vehicles, seismic survey equipment, helicopters, and technologically complex platforms. Thousands of corporations around the globe manufacture these parts, and many of these corporations will fail in the Peak Oil crisis. (3) States governments will lack funds for maintaining the Interstate Highway System, including snow plowing, bridge repair, surface repair, cleaning of culverts (necessary to avoid road washouts), and clearing of rock slides. A failure in one section of the Interstate highway will cut off transportation for that highway and everything it carries: food, emergency supplies, medicine, medical equipment, and spare parts necessary for energy production. (4) The power grid for most of North American will fail due to a lack of spare parts and maintenance for the 257,000 kilometers of electric power transmission lines, hundreds of thousands of pylons, and thousands of power generating plants and substations, as well as from shortages in the supply of coal, natural gas, or oil used in generating electric power. Power failures could also result from the residential use of electric stoves and space heaters when there are shortages of oil and natural gas for home heating. This would overload the power grid, causing its failure. The nation depends on electric power for: industry; manufacturing; auto, truck, rail, and air transportation (electric motors pump diesel fuel, gasoline, and jet fuel); oil and natural gas heating systems; lighting; elevators; computers; broadcasting stations; radios; TVs; automated building systems; electric doors; telephone and cell phone services; water purification; water distribution; waste water treatment systems; government offices; hospitals; airports; and police and fire services, etc. Phillip Schewe, author of “The Grid: A Journey Through the Heart of Our Electrified World,” writes that the nation’s power infrastructure is “the most complex machine ever made.” In “Lights Out: The Electricity Crisis, the Global Economy, and What It Means To You,” author Jason Makansi emphasizes that “very few people on this planet truly appreciate how difficult it is to control the flow of electricity.” A 2007 report of the North American Electric Reliability Corporation (NERC) concluded that peak power demand in the U.S. would increase 18% over the next decade and that planned new power supply sources would not meet that demand. NERC also noted concerns with natural gas disruptions and supplies, insufficient capacity for peak power demand during hot summers (due to air conditioning), incapacity in the transmission infrastructure, and a 40% loss of engineers and supervisors in 2009 due to retirements. According to Railton Frith and Paul H. Gilbert (National Research Council scientist testifying before Congress), power failures currently have the potential of paralyzing the nation for weeks or months. In an era of multiple crises and resource constraints, power failures will last longer and then become permanent. When power failures occur in winter, millions of people in the U.S. and Canada will die of exposure. There are not enough shelters for entire populations, and shelters will lack heat, adequate food and water, and sanitation. (5) Water purification and water distribution systems will fail, leaving millions of metropolitan residents without water. (6) Waste water treatment systems will fail, resulting in untreated sewage that will contaminate the drinking water for millions of residents who consume river water downstream. (7) Transportation and communications failures will cripple federal, state and local governments -- leaving and residents without emergency services, emergency shelters, police and fire protection, water supplies, and sanitation etc. (8) Mechanized farming will cease, and harvested crops won’t be transported more than a few miles. (9) Food won’t be transported from the Midwest, California, Florida, and Mexico to the U.S. population. (10) Fertilizer, pesticides, and herbicides won’t be produced. (11) Due to limited farm acreage, most cities and towns will be unable to support their populations with sufficient food from local farming (see Paul Chefurka and Paul Chefurka). (12) Homes across the U.S. will lack heating. Even if homes are retrofitted with wood stoves, local biomass is insufficient to provide for home heating, and it will not be possible to cut, split, and move wood in sufficient quantities.

In the coming years, the U.S. faces multiple energy crises. Each crisis will generate delays in handling other crises, thus making it more and more difficult to address multiplying problems. The worse things get, the worse they will get. A grid lock of crises will paralyze the nation. This grid lock will occur long before we extract all of the recoverable oil, especially in off-shore and hard to access locations.

Cliff Wirth